Silver struggles with higher Dollar

Silver prices are starting to consolidated but the damage has been done as the precious metal has moved through the 20 dollar per ounce level. The strength in the US dollar has been a negative for silver as investors view precious metals as a currency which has been under pressure as the dollar has gained strength. With strong US data likely in the cards, along with higher US yields, silver prices will likely remain under pressure.

Recent inflation data has been mixed, allowing silver prices to slide lower. While the US reported weaker than expected personal consumption expenditures for May at the beginning of this month, China reported a jump in CPI during Asian hours on Tuesday.

China’s June Consumer Price Index reading was above expectations at 2.7% year over year. The consensus was for 2.5% after a 2.1% increase in May. The increase was driven from food. Food inflation accelerated to 4.9% from 3.2% in April, while non-food prices were steady at 1.6%. On a month over month basis CPI was unchanged. Given that the government’s target is 3.5% this year, Tuesday CPI report is unlikely to change the thought process of the PBOC.

While daily silver prices have consolidated, the monthly chart shows an asset that is under pressure. The 10-month moving average has crossed below the 50-month moving average showing that a long term trend is now in place. The next level of target support for silver is a horizontal trend line that comes in at 14.63. Resistance is seen near the June highs at 22.97. Momentum on a monthly basis points to lower prices with the MACD printing at its lowest level over the past 10-years. The RSI is in the lower end of the neutral range printing near 37, above the oversold trigger level of 30.

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